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US stocks hit 5-year high on merger activity

The S&P 500 closed at a five-year high following a recent spate of corporate deals.

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Traders work on the floor of the New York Stock Exchange on January 28. (Spencer Platt/Getty Images)

US stocks rose Tuesday, with the S&P 500 closing at a five year high, after a burst of merger activity.

Chatter about a possible tie-up between Office Depot and OfficeMax got investors excited, The Street reported, with the office supplies rivals surging 9.4 percent and 21 percent respectively.

The Wall Street Journal reported the companies were "in advanced talks" to merge and Bloomberg said a deal could be announced as early as this week. 

Reuters reported a recent spate of corporate deals, including the Berkshire Hathaway/3G Capital acquisition of H.J. Heinz and Anheuser-Busch InBev’s revised $20 billion takeover of Grupo Modelo, has buoyed investor sentiment and underpinned gains.

“Recent mergers and acquisitions are further evidence of just how high the mountain of cash has grown for corporate America,” Andrew Fitzpatrick, director of investments at Hinsdale Associates, told MarketWatch.

“These companies are starting to be forced to possibly pursue deals, raise dividends or buy back stock, all of which are key drivers that could move stocks higher.”

The Standard & Poor's 500 Index gained 11.15 points, or 0.73 percent, to close at 1,530.94, its highest closing level in five years and just 2.2 percent off its peak, according to Reuters.

The Dow Jones industrial average rose 53.91 points, or 0.39 percent, to close at 14,035.67, while the tech-heavy Nasdaq Composite Index ended up 21.56 points, or 0.68 percent, at 3,213.59.